LEADING THE WAY OUT OF THE EU

Kateinen Triggers Trade War inside the Commission

Wednesday 12 July

Prominent EU Commissioner Jyrki Kateinen challenged the EU’s blinkered trade orthodoxy on Monday when he said trade deals should be negotiated separately to investment deals.

Leave.EU supporters may recall the controversy surrounding the Investor State Dispute Settlement provisions inserted into the negotiating mandate for an EU trade deal with the United States, which helped to bring that prospective deal to halt as well strengthening the case for Brexit. Much like the EU, ISDS arrangements are sovereignty sappers, giving randomly appointed judges the power to take down government policies.

In May, the European Court of Justice helped delegitimise the European Commission’s affection for ISDS by ruling that trade agreements could be agreed more easily if they did not include chapters on investment. Amid the waves of propaganda following a political agreement on the terms of an EU-Japan free trade deal, few managed to point out that investment failed to make the cut.

The European continent is an uneven constellation of developed and lesser developed economies and democracies, which poses to closer economic links, both internally – case in point, the Euro crisis – and externally. Most trade partners looking to squeeze the maximum economic potential from a trade deal will want some form of commitment to encourage inward investment from one another.

For weaker economies eager to attract investment and boost growth, provisions to protect foreign investors are an unfortunate necessity. Such countries are vulnerable to corruption and troubled by weak judicial systems.

It is inconceivable that any trade partner would seek to pin Britain down under an ISDS agreement, its judicial system is adequately robust, which puts into sharp relief the ridiculousness of EU demands for the ECJ to act as the guarantor of migrant rights post-Brexit. The whole ISDS debate does not apply to the UK, but it is for the EU, counting as it does, the likes of Romania and Bulgaria among its ranks. Indeed investor protection was forced upon the EU by the US because of lingering concerns over these countries and several more.

Japan it seems, would prefer to avoid the risk altogether and cut down the scope of its trade deal with the EU, which is just one reason why the fanfare over its agreement-in-principle with the EU was massively exaggerated. But do not expect the land of the rising sun to be so reticent when it sits down at the negotiating table with the United Kingdom. Two evenly matched economies will want to extract the full potential, but there’ll be no questions of ISDS, just look at Nissan in Sunderland and Toyota in Derby, just two of the most high-profile and very expensive Japanese investments in the UK that pre-date any trade or investment deal.

The case of Katainen and Japan illustrates once more how complicated boosting cross-border trade and investment is if it is being conducted on a multilateral basis. After leaving the EU, Britain will only be going bilateral, brilliant.